Resiliency and Property Values

Resilience image (Adobe)

This essay began with the co-authors discussing declining real estate values in Key Biscayne. As we delved into causes and responses, we branched into the Village budget, the proposed bond financing, and how policies can help to improve real estate values and otherwise spur economic development. Although we analyzed things differently, as our conversation progressed we found more agreement than expected. 

Our conversation is one of many prompted by the Village Council’s determination to ask Key Biscayne voters to decide in November whether the Village should be able to borrow up to $100 million for resiliency projects, by means of general obligation bond financing. Considering how we’ve clarified and narrowed our own disagreements on certain questions, we thought it might help the ongoing public debate to share some of our views.

We both see that resiliency planning and fulfillment of those plans has and will increasingly have a direct effect on real estate values. We diverge however in that one of us sees flood risk mitigation and infrastructure hardening as long-term considerations having lower immediate priority than other value-enhancing strategies, and that the bond proposal is premature, unnecessary and ill-advised inasmuch as assessed values in the Village have trended downward.   

Although we do not see eye-to-eye on the bond proposition itself, we each think the community has not been sufficiently informed thus far about the financing or intended purposes. Without plumbing the nature of representative democracy and how policy formulation should occur, we each think it suboptimal to refer complicated and consequential questions to underinformed electors. We each think that workshops and honest answers to obvious questions would help planning and, to some degree, community buy-in. There is obvious disagreement on the bond financing proposal, but we think some points of disagreement can be managed by addressing misunderstandings or misinformation.     

We each think that the touted requirement of “shovel ready projects” cannot be the sole or even a major determinant in making a financing decision under the circumstances. While we do not agree on factors that bear on whether the bond question should or should not pass, we agree that financing and project details yet to be understood could, if confirmed, bear on the referendum decision by November. 

Questions that have been asked include: Is general obligation bond financing the only means of paying for resiliency projects, or is such financing one option among others? Does a favorable vote on the referendum obligate the Village to issue a bond and borrow money?  If bond financing is selected, over what time sequence will principal be taken-down and what costs will attend borrowed and available but unborrowed principal? What debt service is projected, year-by-year? Is debt service to be managed by annual budgeting, or special assessments or a combination to be determined case-by-case? What controls will ensure that later Village Councils won’t alter spending plans? What effect would substantial indebtedness as contemplated have on the Village’s favorable credit rating?  And is the Council’s thinking to actually borrow $100 million in the coming year, or merely to secure required voter authorization for government obligation bond-based borrowing?

“Green” and resiliency planning and implementation work have been going on for years, and flood management and shoreline protection work have been priorities for a long time. We recognize that these things have progressed and been paid for in a piecemeal manner.  We recognize why some see the need to plan and budget comprehensively. Given how information has been disseminated, we understand why some have reacted negatively to the proposition of borrowing up to $100 million all at once, with many projects proceeding over time and without knowing definitively what the money will be spent on and what we will gain as an outcome.  We agree that better information is needed for voters to know what they’re asked to decide.  

We agree that we may damage ourselves reputationally if we don’t demonstrate a real commitment to funding and acting on resiliency measures, beginning now. We disagree about the importance of this consideration relative to other factors bearing on our community’s reputation. We agree in general that many necessary projects fail to proceed because financing plans weren’t developed in advance. The Everglades restoration projects are a good example.    

In a given budget season, it is not rare for councilmembers and residents to disagree about the necessity or wisdom of slated investments, about competing goals and priorities, and about levels of spending and the millage rate needed to pay for everything. The resulting conversations can be affected by relative pessimism and heightened fiscal caution when property values dip as they have for the past 3 years. Austerity is usually offered as being essential in a down year. However, decreased spending is often evasive when it comes to basic governmental services. As easy as it may be to presume that waste and inefficiency pervade operations, normally the presumption fails to garner a consensus when it’s time to find examples. On the other hand, it’s easier to argue in a down year that capital investments can wait.  

We recognize that relative priorities involve choices, and that choices often require judgment calls. We believe that the judgment calls presently before Council and the community should take into account:

• The year-by-year trend of declining property values
• Increased news reporting on flooding and sea level rise 
• Insurance rates and availability and long-term mortgage impacts 
• The expense and time-horizon for infrastructure hardening and engineering mitigants 
• Shoreline protection and beach maintenance requirements
• Drawing tourists and investors 
• Viability of the commercial sector 
• Pandemic-related financial stresses affecting the community overall
• Possible federal and state funding support for infrastructure projects 
• The Village Council’s responsibility to identify needed investments and plan and budget for them  

We analyze some but not all of these factors in the same way. However, we each think that, whatever the outcome on bond financing, we should budget for actions, and take actions, both for resilience and for economic development by promoting our incredible attributes and amenities to other parts of the United States and elsewhere that are losing population to Florida and perhaps do not appreciate what Key Biscayne has to offer.

As the public discussion on municipal debt and resiliency unfolds, we should stay focused on our Island “brand”, recognizing that our value depends increasingly on credible demonstrations that we’re taking real steps to ensure a sustainable future as we maintain excellent services and a low property tax rate. These steps correlate with property values. Where flooding recurs, property values sink. On this we agree.